Medicaid outpatient benefits changed

Robert Pear, New York Times

Published 4:00 am, Saturday, November 8, 2008

In the first of an expected avalanche of post-election regulations, the Bush administration on Friday narrowed the scope of services that can be provided to poor people under Medicaid's outpatient hospital benefit.

Public hospitals and state officials immediately protested the action, saying it would reduce Medicaid payments to many hospitals at a time of growing need.

The new rule conflicts with efforts by congressional leaders and governors to increase federal aid to the states for Medicaid as part of a new economic action plan. President-elect Barack Obama has endorsed those efforts.

In a notice published Friday in the Federal Register, the Bush administration said it had to clarify the definition of outpatient hospital services because the current ambiguity had allowed states to claim excessive payments.

But John Bluford III, the president of Truman Medical Centers in Kansas City, Mo., said: "This is a disaster for safety-net institutions like ours. The change in the outpatient rule will mean a $5 million hit to us."

Herb Kuhn, the deputy administrator of the Centers for Medicare and Medicaid Services, defended the rule. "We are not trying to deny services," Kuhn said. "We want to pay for them more accurately and appropriately. Payments for some services were way higher than they should be."

The rule narrows the definition of outpatient hospital services to exclude those that could be provided and covered outside a hospital.

In May, the White House said it wanted to avoid the rush of "midnight regulations" that had occurred at the end of other administrations. But Bush administration officials said this week that they still intend to issue, or relax, many economic, environmental, health and safety rules before they leave office Jan. 20.

Medicaid, financed jointly by the federal government and the states, provides health insurance to more than 50 million low-income people. Services can often be billed at a higher rate if they are performed in the outpatient department of a hospital rather than in a doctor's office or a free-standing clinic. Hospitals generally have higher overhead costs.